The Economic Relationship Between China And Africa Economics Essay

Introduction:

Trade relation mentioned the political, legal and institutional aspects among the countries, it is about the relationship among the economic and political situation of countries, especially as the developing countries increase rapidly and fast in the international markets, therefore the economic challenges are so complicated and will contain long term international cooperation to trace on it. As the WTO occurred in the international markets, it offered the importing and exporting all around the world, which needed countries to cooperate each other in order to gain more profits and goods in the future.

Nowadays, there are competitions between Asian drivers and African drivers in the international marketing; it is the fact that there is competition existing in the international markets, as the number of Asian drivers increased, the African drivers hardly found the jobs in order to survive. For example, there are the competition between Asian workers and African workers, because China got huge amount of workers, as the Chinese workers entered into the NZ markets, in order that, African workers could not find the jobs, because so many Chinese workers obtained the jobs. Many people thought the South-South cooperation will bring about many benefits and profits to the both countries, China and SSA, they could both get benefits from importing and exporting goods and services, which could encourage the whole world’s economic conditions and business situations. For example, China exporting the clothing, food and textile to Africa, and then Africa could get benefits from importing, because Africa is lack of food and resources. And in the meanwhile, Africa exporting oil and fuels to China, and China could use those oil and fuel for the future development and operations. Therefore, both parties could get benefits from each other. However, many people held the different views and opinions, South-South cooperation could bring about negative impact on SSA, because the people in SSA could not find the suitable jobs because the goods and service which are all importing from China.

At lastly, in this essay, the two different views and issues were discussed and talked about in the two following sectors: which are benefits and harms of South-South cooperation.

Discussions:

It is the controversial topical on whether the china and Sub-Sahara Africa cooperation is competitive or complementary, if the China imported the fuel and oil from SSA at the cheaper price, it may gain more and more profits from China, and then China exported goods, such as cheaper food and products to Africa, then SSA could purchase goods and products at the cheaper price, therefore their relationship is complementary, because two parts could benefit each other and both parties could gain profits through trade relations. However, when China exported cheaper goods to SSA, it could make competition for the local producer of SSA, and so their relationship between China and SSA is so competitive, and China gained profits and in the meanwhile the SSA lost profits.

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It is obvious that China becomes the stronger in the current international market, nowadays china generated ripple effects in the world economy, and it remained the strongest country in the economic, political and legal situation. China is the abundant in resource; therefore it had the trade relation with other countries, such as India, America and Japan. For example, China imported timber, oil and metal from Africa, the local producer of Africa gained profits and the GDP of Africa went up higher than previous years, however, the China exported lower cost texitile to Africa, therefore the customers consumed Chinese texitile because of cheaper price, the local producer of texitile got the threaten because their texitile price were higher than importing texitile from China. Therefore, China brought about the negative effects to good governance and macroecnomics management in Africa because of the potential Dutch disease implications of commodity booms, the view has been supported in the work of zafar(2007).

The rapid growth between China and SSA is a significant source of impact, trade values increase to $10 billion in 2002 to more than 40$ billion in 2005 and reached to 50$ billion by 2006, the view has been supported in the work of zafar(2007). And China has become a famous and major exporter of manufactures in the entire world. In the meanwhile, SSA’s imports from China had reached to over 8 per cent by 2006, however, compared to exporting, imports from China have been increased slowly than exporting, and then SSA’s trade balance with China to turn from Negative to positive(Zafar,2007).

Therefore, the relationship between China and SSA is a great concern and problems, which brought the negative effect on future production, SSA consumers lightly, brought local goods from their own countries, and therefore there are important and adverse long-term implications for SSA industrialization (Kaplinsky and Morris 2008). Therefore, this complex relationship got the indirect impact and direct impact, because China itself is a huge resource country and it itself impact global prices, China got cheaper labor price and goods, therefore SSA customers wanted to purchase cheaper goods, therefore it got significant impacts on SSA.

Trade-related income proverty and distribution impacts can be significant(McCulloch,Winters and CIRERA(2002). As the importing of China is increasing, it could bring about the benefits to lower income consumers. In many countries, the primary displacement effect is on imports of manufactures from other, non-SSA economies, with wholesalers and retailers switching their sourcing to cheap Chinese suppliers (Jenkins and Edwards 2006).

The increase in commodity production accompanies with both with capital-intensive technologies, and even many soft commodities, such as tea, coffee, cotton, therefore, the number of exporting of China is increasing not only give a negative impact on the big wholesaler of SSA, not only the small factory and stores.

The trade between China and SSA not only brought about the direct impact on the global markets, but also it could bring about the negative impact, indirect impact occurred as a consequence of china’s relations with undeveloped nations. For example, China got high demanding for commodities, which may increase the global price at a higher level, and even though Ethiopia did not want to export animal feeds to China( direct relationship), and it chose to sell animal feeds into the global markets, however, the price could be influenced by China’s growing imports( indirect impact) (Kaplinsky and Morris 2008).

Therefore, it should be focused on the impact of indirect trade links, the increase of product price should be higher mentioned, and there is the indirect effect of China’s trade on Africa (Kaplinsky and Santos-Paulino 2006). Exporting and importing goods and services in WTO rules involves the removal of all quota and tariff. The government removes the tariff and quota for exporting and importing, which encouraged the international trade, however, the negative impact of the removal of tax from China in third country markets on poverty and livelihood is huge and unpredictable. For example, China is abundant in the labor and resources, there are a great number of clothing manufacturing factories in the south city of China, those factories could manufactured the beautiful clothes and commodities in very lower price. And then, those factories focused on the exporting clothing to third world countries. In a result, the clothing importing impacted the SSA clothing industry, because those clothing importing of China enhanced the consumption power of consumers in SSA. The increase of exporting clothing from China to SSA could bring about the negative impact on the factory and store in SSA, because the consumers in SSA preferred to buy importing clothing, because of the style or the price. And then some local clothing factories in SSA lost the profits, and then the local factories in SSA shut down their business due to competition. Therefore, the result could bring about not only the degree of job loss and even more seriously the result of the nature of the job loss. If the factories stop to do the business, the workers in the SSA could lose their works. And especially, most workers are women, if the women lost their jobs, which could bring about the impact on their families. The issue of loss employment could become serious and severe, and then the employment decline has become the implication of major property. And secondly, if the workers in the SSA could not find the jobs, because of the financial crisis and destroyed the employment situation, those people even lived in the poverty, the rate of criminal would increase, SSA’s economic condition went to become much more worse. Thirdly, another countries could be impacted indirectly, for example, if the consumers in SSA only accepted the clothing from China, other importing countries found it difficult to become competitive in the SSA markets, then importing to SSA would decline, even more seriously, which could made negative influence on global economic situations. At lastly, the rapid importing goods from China to SSA could harm SSA industry and economic conditions.

At the third stage, the China wanted to promote the aid to SSA, and the formal aid between China and SSA go back to October 2000, it is called China-Africa Cooperation forum, the meeting was held in Beijing, it was set up the financial institution between China and Africa. China are willing to reduce Africa’s debts burden, and promote investment in SSA( Muekalia 2004). In the detail of those institutions in this meeting are useful, such as debt relief are useful and helpful for the current situation of SSA, because the country is developing and it needed the strong financial support and back up. However, some institutions are not useful in this meeting, such as the tariff exemption, tariff exemption should be based on the country which got huge resources and capitals, for the SSA, the country itself was less in resources and capital. And also China was criticized for some range of issues, such building the stadium and government office building, and China suggested SSA to have human rights, good governance and social justice. Those issues are good issue and suggestions, however, China less emphasize on the current situation of SSA, those planning and details could not make SSA become strong in the short term, and in the long term the institution will less become true.

At lastly, there is negative consequence of Chinese trade on income distribution. There are many threats and opportunities in the international trade, especially the relationship between China and SSA. The income distribution in SSA is unbalanced, and international trade between China and SSA could make SSA’s income gap wider and wider, for example, the institution of international trade will make SSA poverty more and more poorer, and unemployment rate is increasing and rapid growth in trade between SSA and China posed a major policy challenge to SSA economic. Moreover, SSA exported hard commodities, particularly basic metal and oil, which could make SSA resource much less and less and it would make negative impacts on the Africa’s economic conditions. And China and SSA got the different cultural backgrounds and knowledge, therefore it was difficult for them to communicate and cooperate, policy and capability development will be undermined and may be misdirected, for example, China is abundant in resources and populations, it was labor intensive and commodities intensive, however, SSA is the poorer countries in the entire world, it got lower income distribution and abundant poverty. Therefore, the challenges and threats existing between China and SSA should not be overlooked.

On the other side, it is no doubt that the cooperation between China and SSA encouraged the overall levels of productivity and innovation in the economy. South-South cooperation developed a great number of opportunities between China and SSA. The cooperation consisted of three sectors; there are political sector, economic sector and technical sector. Therefore, if the China and SSA cooperated with each other, we should think about the benefits and harms in the three sectors. And the cooperation also included the exchange of knowledge, skills and technical skills between China and SSA, and SSA could get benefits from the foreign aid, because compared to China, SSA is poorer countries, therefore, the aid and financial support encouraged Africa’s capability to deal with the problems of countries, such as poverty, poor infrastructure. And during the cooperation with China, SSA could deal with some issues and problems, such as food, energy, financial and economic crisis.

This threat to manufacturing exports potentially has large consequence for industrial development and competiveness as it has been found that exporting firms have significantly higher productivity than non-exporting firms in Africa (Mengistae and Patillo, 2004). The exporting firms in the Africa could get benefits from the exporting, because the China got higher demanding of hard commodities, such as oil and fuel. Therefore, the exporting of oil and fuel to China could bring about a great number of benefits to SSA, because the SSA exporting company could gain more and more profits through exporting goods and services.

A lot of views and opinions stated that the competition has been so severe that even traditional products that had been manufactured in Africa for several centuries, are now displaced by China(Idun-Arkust,2008). However, the view got another side of issue, the competition entered into the local markets in SSA, which could bring about the threats and challenges to SSA local markets, but, it could make the local producers and manufacturers got the view that they should encourage their business development and reconstruction. The local manufacturers got the pressure from competition; therefore, they got the opportunities to think about their marketing strategies and business management, and expanding their business to the international business.

And there is the obvious that increase in merchandise trade in Africa, the general GDP in SSA increased because of increase in the merchandise trade. The local merchandise factories could get lots of benefits from the international trade with China, therefore, when the local companies wanted to expand their business, they need more and more local workers, and which could deal with SSA unemployment problems, more and more unemployment people found the opportunities to get the jobs, and they could support their families, therefore, the whole family could get benefits from the international trade with China.

And the international aid and financial support could bring about the help to the SSA, SSA is the poorer country in the entire world, they need help and they are less in resources and capital. According to the trade condition between China and SSA, there held conference in Beijing, this meeting helped the China and SSA to remain the good relationship in the international trade. China government donated goods and services in order to help SSA, such as China donated money on the education of SSA, which helped the SSA children to have the good education opportunities. The institution helped the import and export to remove tariffs and quotas, which helped both parties, could get the benefits from the removal of the taxes and tariffs. For example, if the tariff removed, the exporter and importer of SSA could get profits.

South-south cooperation could benefit the SSA tourism industry; Africa country is famous in the nature resource and wide animals. The international trade could help SSA tourism industry get profits and get famous in the entire world. The exchange of knowledge and skills between SSA and China will help Chinese travelers to better know the nature resources in Africa country, and this could attract Chinese travelers to come into country and spend the money into SSA. And the tourism industry in SSA could benefit the whole SSA industry and encouraged the global economic conditions.

And exchange and cooperation of China and SSA helped SSA government better know the condition of SSA, the government will learn some experiences and knowledge from China, and in order for them to learn and do some practices. For example, for the SSA government institutions, the SSA government rethinks their regulations and institutions compared with China, and then SSA tried to spend money on the household and public service. And the government encouraged the exporting and importing in SSA, which could encourage the SSA economic structure and conditions, and in order to become better survival in the competitive markets.

In the political parts, the both countries were good friends a long time ago, when the China was rebuilt in 1949, China got lots of support from African countries. We all know the western countries got the union and they cooperated with each other to develop and encourage with each others. For the developing countries, such as China, Africa and India, they got good relationship as a team, they worked together to protect themselves from western countries. For example, if some political issue occurred in some time, the Japan and China history issue occurred, the America will help Japan to deal with the issue, and then the Africa became the biggest support for China to deal with those sensitive issues. And another example is that, when the SSA got the destroy in nature; China became the first country to donate money and goods for SSA to survive for the difficulties.

And the cooperation of South and South encouraged the exchange of knowledge and China, because the both countries got different cultures, backgrounds and history, therefore which could helped the people in both countries to learn knowledge and skills from each others. And now there are many African studies studied in Beijing or ShangHai Universities, they came here and spent money in China, which could make Chinese government gain education money. And on the other side, the African students studied China, if they found some interesting in China, they would stay in China, and China provided lots of job opportunities in Africa and then China also could get foreign workers, and therefore the both parties could benefit from the exchange of skills and knowledge.

For the investment, nowadays there are lots of Chinese businessmen came Africa to invest money and capital in the SSA, for example, some people had interested in gold and metal in Africa, and then they held the factories in Africa, and they needed lot of workers to work their factories, those investments helped the SSA to deal with unemployment issues and problems. Therefore, the investment encouraged the local golden and metal producers as well, the local producers wanted to cooperate with the investors, and they could put business together and manufactured gold and metal together, and then they could sell the gold and metal into the international markets, and then the both business parties could earn the money and get profits.

For the economic conditions in SSA and China, the cooperation would give the both parties opportunities to develop each others. The whole economic in SSA could get many benefits, for the exchange of goods and services, the general GDP in SSA could increase rapidly and fast.

The cooperation not only benefit the tourism industry, but also the cooperation could bring about the benefits to the importing and exporting industry. The household could spend less money to buy the goods and services from China, for example, SSA customers would buy the tea, clothing from the China exporting. Compared with the local price, SSA found it cheaper to buy clothing from China, and those kinds of styles are fashionable and beautiful. And on the other side, SSA exporting oil and fuel to China, China got the higher demand for oil and fuel, because they got huge population, and then the business got benefits from exporting and importing. Therefore, the both exporting and importing could benefit SSA and China, they two could make profits and money from importing and exporting goods and services, we found that the exchange of goods and service is beneficial and fair, and the both parties should cooperate with each other.

Conclusion:

The South-South cooperation brought about the change in the structure of world economy and condition in China or SSA. It brought the challenges and threats to the both parties, and but also it brought about lots of benefits from South-South cooperation. At first, those South-South cooperation helped SSA merchandise trade to increase. South-South cooperation helped to promote trade and investment activities in Africa, and China and Africa used their export-import banks as Channel for providing finance and promoting commercial interest in trade and investment. And moreover, China is the biggest financial support and back up for Africa in the infrastructure and production sectors. And China helped SSA to deal with financial crisis and donated money and goods to Africa. There has been an increase in international investment agreements between China and SSA, the removal of tariff and quotas will helped the exporting and importing industry to get taxes and the exporting and importing business could get lots of benefits from the international investment agreements. The exchange and communication between SSA and China’s skills and knowledge helped the countries to better know each other and keep the good relationship with each other. However, the South-South cooperation between SSA and China could make the situation not complementary but competitive, it is obvious that China is abundant in resources and capital, it exported the soft commodities, such as tea, food and clothing to Africa, which could make Chinese economy remain the successful situation, and importing suppliers could make the huge money from exporting goods and services from SSA, and then China imported oil, textile and fuel from SSA, those energy are useful in China economy and situation. However, importing goods and service from China will make the increase of unemployment rate; lots of workers in Africa will not find the job and lost the nature of jobs. Therefore, from my point of view, South-South Cooperation not only made the SSA get richer and richer, but also it could make the Africa people got poorer and poorer, and South-South cooperation will bring about the negative impact on Africa.

Referencing:

Idun-Arkhurst I(2008).China’s relations with China.China in Africa Report no.3.South Africa Institution of International Affairs.Johamesburg, South Africa.

Jenkins, R., and C. Edwards (2005). “The Effect of China and India’s Growth and Trade Liberalization on Poverty in Africa.” Dept for International Development, DCP 70, London: DFID.

Kaplinsky,R.and A.Santos-Paulino(2006) “A Disaggregated Analysis of EU Imports: The implications for the study of Patterns of trade and Technology.” Cambridge Journal of Economies 30:589-611.

Kaplinsky, R. and M. Morris (2008, forthcoming), “Do the Asian Drivers Undermine Export-Oriented Industrialization in SSA”, World Development Special Issue on Asian Drivers and their Impact on Developing Countries, 36 (2)

McCulloch, N., L. A. Winters and X. Cirera (2002). Trade Liberalization and Poverty: A Handbook, London: Centre for Economic Policy Research

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Zafar, Ali (2007) “The Growing Relationship Between China and SSA: Macroeconomic, Trade, Investment and Aid Links.” World Bank Research Observer 22(1): 103-130.